California Reveals Plans to Tax Space Flight

While commercial passenger-carrying space flight is still at least a year away from reality, the state of California is getting ready. This week, the state announced a proposal to modify its tax code to include space travel. Similar to tax codes governing other types of transportation (such as air, sea railroads and trucking) California’s Franchise Tax Board plans to tax space travelers by the mile.

The good news here, apparently, is that the more miles a company travels, the less it will be taxed.

For the time being, space flight in California and elsewhere remains a bucket list dream. Virgin Galactic has said it is hoping to shuttle its first space tourists next year. This, however, is not exactly a new refrain for the company.

Still, when the company is ready to fly, California will be ready to claim its share of the revenue.

In its “Initial Statement of Reasons” document, the tax board states that California has always “prided itself on being in the technological forefront,” and that the proposed regulation “will provide concrete evidence that the state actively engages with industry to address emerging industries.”

The proposed tax code is not just applicable to companies that specialize in space travelers but it also applies to all space transportation, including cargo hauls. Further, the tax rate will apply to any company planning to launch a spacecraft from California, whether or not they are a California-based company. On the other hand, California companies launching elsewhere will be exempted from the space mile regulations.

What about companies who can’t reveal their mileage due to confidentiality agreements? No problem, the board says that “such contracts shall be conclusively presumed to be 310 statutory miles multiplied by the number of launches pursuant to that contract.”

To put the 310 miles into context, the average Virgin Galactic flight will travel approximately 110 kilometers (68 miles,) while the International Space Station is located about 250 miles above the earth's surface.

While California is apparently the first state to consider adding commercial space flight to its tax code, other states will soon follow suit according to an article in the San Francisco Chronicle.”

In an interview with the Chronicle, John Logsdon, a professor emeritus at George Washington University who co-founder the school’s Space Policy Institute has said he’s not sure the new tax is a good idea.

“States that don’t levy taxes would have that competitive advantage over states that do,” he said. “If California puts in a tax and Florida or Texas doesn’t have a similar tax, I’m not sure that helps California in a competitive way.”

The Franchise Tax Board, however, says that “uncertainty about California tax treatment of space transportation activities could cause the industry to focus its activities elsewhere.”

The state also claims that certainty over the tax will “foster an atmosphere of growth and prosperity once present during the golden age of California's aviation industry, thereby creating jobs as the industry thrives in this state.”

The Franchise Tax Board holds a number of public meetings every year and encourages interested parties to attend and comment on the proposed new code. People can also submit comments online.

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